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What every SME needs to know about Factoring

A recent survey by SCORE found that over 80% of business closings was caused by cash-flow issues.  Even successful business can run short of cash when customers are slow to pay.  This is especially true in industries that have extended terms, such as warehouse staffing, IT staffing, healthcare staffing, nurse staffing, manufacturing, fabrication, wholesale/distribution.

Factoring in a Nutshell

As lenders are becoming more restrictive with who qualifies for a loan more business owners are turning to a lending alternative called accounts receivable factoring. Factoring is when a company (client) sells its outstanding invoices to a factor for cash instead of waiting to be paid by their customer.   This money transfer helps the client to meet payroll, pay bills and order inventory to complete their next purchase order.  The factor is not lending money to the client so there is no debt.  And the client is not selling off a piece of their business.  But the client is getting financing based on their accounts receivable.

A Quick Source of Funding

Factoring is most popular with companies less than 3 years old– a start-up, and companies facing very fast-growing sales.  Accounts receivable factoring provides money faster than banks can traditionally make a loan.  The application process is usually on-line with approval taking only 2-4 days.

Small, Medium Enterprises rely on factoring to provide steady cash flow from seasonal sales, keep up with payroll, taxes, purchase inventory, hire additional employees, or acquire competitors.  Without a reliable source of cash flow business owners will miss many opportunities to grow their business.

Along with providing invaluable cash flow, factors help their clients make better credit decisions.  Factors will help their clients set prudent credit limits and negotiate faster payment terms from their customers.  The factor is the business owners first line of defense in today’s economy where more and more big companies are primed to file Chapter 11 bankruptcy.

If you want to take your company to the next level American Receivable Corporation can help you.  For over 42 years the original founders; Jack Stieber and Brad Gurney, still manage daily operations.  Providing their clients with attention to every detail and true concern for their clients success.  Call the today at 1-800-297-6652.